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AMP share price: 3 things to consider before the half-year report

We examine when financial services giant AMP will report its first-half results, as well as what we know and don’t know about these results.

AMP Source: Bloomberg

Financial services giant AMP Limited (AMP) is set to release its half-year (H1) results next Thursday, 13 August.

What we know

With AMP Limited providing an update on its first-half results last week, the market already has good visibility on much of what the beleaguered wealth manager will report as part of its H1.

Looking at these guided figures – which are yet to be finalised and remain subject to an audit review – AMP expects to report underlying profits across its local and New Zealand wealth management arm, AMP Bank, AMP Capital, of between $140-150 million. This result, said AMP management, was driven by credit loss provisioning at AMP bank and general market volatility.

Breaking this guidance down on a more granular level, AMP Bank is expected to contribute $50 million to Group operating earnings, AMP’s Australian wealth management division $60 million and AMP Capital $70 million.

In saying that, AMP's local wealth management arm has struggled in the first half of FY20, with assets under management (AUM) expected to come in 6% lower, at $126 billion. Net cash outflows have also accelerated, estimated at $4.4 billion for the half – a result, said management, that was driven by the government’s early super access scheme.

Elsewhere, AMP said it expected loan loss provisions to impact its bank division’s earnings by around $25 million. On the positive side however, AMP's loan book grew 3.5% year-over-year, to $20.9 billion. Citibank described this growth as surprisingly strong.

In a statement to the ASX, AMP's Chief Executive Officer Francesco De Ferrari said: 'The pandemic has presented many challenges but has not distracted us from our mission to transform AMP into a simpler, client-led, growth oriented business.'

What remains less clear

Though AMP’s H1 guidance provides the market with strong earnings visibility, the dividend outlook has yet to be clarified. Here it was plainly noted that 'AMP will provide an update on its capital management strategy, including the expected use of net cash proceeds from the sales of AMP Life at the 1h 20 results on 13 August.'

Citi analysts, who have a Sell/High risk rating on the stock, note that they expect AMP will not announce an interim dividend, saying ‘we continue to see low likelihood of a capital return and/or dividend alongside this result.’

Looking forward, the investment bank thinks AMP won’t pay any dividends in its FY20 – though will resume paying dividends in FY21 and FY22, currently expected to come in at 4.8 cents and 6.5 cents per share, respectively.

What analysts are expecting

As AMP forges headlong into a multi-year transformational strategy, sell-side analysts remain mixed on the diversified financial services company, assigning the stock a Hold rating on average, according to the Wall Street Journal.

The average price target of $1.63 per share – also according to the Wall Street Journal – typifies this uncertain view, though suggests some upside potential from current price levels.

AMP finished out Tuesday’s session at $1.45 per share.

How to trade AMP, long or short

Where do you stand heading into AMP’s first-half results: are you bullish or bearish on the stock? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) AMP using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘AMP’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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